Tax powers can be used to foster a business-friendly environment

AS the Scotland Bill continues its passage through Parliament, businesses are considering what effect this might have on their bottom line.

As early as this autumn, the Scottish Government will be obliged to set a Scottish Rate of Income Tax, effective from April 2016, as a result of their new powers under the last Scotland Act of 2012. Any change to this rate, up or down, would affect the attractiveness of Scotland as a place to do businesses.

I believe that Scotland must do more to prioritise our business friendliness and, increasingly, this will fall to the Scottish Government.

Business rates are a good example of this. This tax has been devolved to the Scottish Parliament since devolution in 1999 but while there have been some business friendly reforms, such as the introduction of the Small Business Bonus Scheme in 2008, the fact is that business’ contribution to local government finances in Scotland has increased from just over £2 billion five years ago to £2.8bn today.

Given that the council tax has been capped since 2007, this means the balance between the domestic and commercial contribution to local authority spending now lies heavily on the shoulders of business.

So what does this mean for the average business? Take the High Street of a medium-sized town like Ayr: only around one in five of the 161 business premises liable to business rates could even potentially benefit from reduced rates under the Small Business Bonus Scheme.

That leaves 129 premises liable to pay full business rates, less any other reliefs they may be entitled to. The average rates bill for these businesses in 2010 was £31,050 but in just five years this has increased to £36,975.

During a period of economic recovery, this has been an unwelcome added burden on business costs.

As the Scottish Government gains more responsibility for tax raising, it must develop a clear message around its tax policy. I believe that message must be around the creation of a business- friendly environment, with taxes designed to help businesses to prosper and to create jobs.

In the case of business rates, that means fundamental reform of a tax which has increased year on year for businesses since 2010.

Such reform is long overdue and would demonstrate the real benefits to business that Scotland’s new tax powers could bring. Liz Cameron is chief executive of Scottish Chambers of Commerce